The Road Not Taken I just read your article on Amtrak (May). I found it an excellent article.
There are two disconcerting flaws in the piece. First, the statement that land grants of 1.3 million acres would be about the size of Michigan, Wisconsin, Illinois, and Indiana. Please note that each square mile contains 640 acres. An area 46 miles on each side—square in shape—contains more than 1.3 million acres. This would fit neatly into less than half of Ohio, or my map is all out of scale. Second, no mention was made of the fact that the vast majority of all highways in the United States were built with tax money. So, while it is true that the automobile has displaced the train as the favorite mode of travel, it would not have been so if all highways were privately built, for example, toll roads.
It looks to me like the growth system would have been entirely different in the absence of government interference. Which would be predominant today? We'll never know!
Richard W. Campbell
In Jeff Shedd's article, "Amtrak: Congress's Toy Trains" (May), the question of subsidies to airlines is simply written off to "trust funds," that is, he states, "Trust Funds account for 85 percent of the federal aid to commercial air transport." I do not believe this to be an accurate statement as the federal subsidies to aviation are so hidden and disguised that even dedicated free-market economists cannot detect them.
I love trains; however, I would support the elimination of all subsidies to Amtrak provided that we, in tandem, eliminate all subsidies to aviation. Additionally, Mr. Shedd could have (and should have) written about all of the subsidies to the airlines—the very subsidies which were the nails in the coffin of passenger railroad service.
Fort Lauderdale, FL
Mr. Shedd replies: The corrected figure for total acres of land granted by the federal government to the railroads is 130 million, not 1.3 million, as printed in the article. This is in fact an expanse of land equivalent to the area stated in the article. As to Mr. Campbell's second point, he is correct: Highway development was largely subsidized by local governments in the 1940s. Significantly, however, the interstate highway system—begun in 1956—has been built almost entirely out of user fees; thus, no real subsidies are involved. Weep not for the railroads, however. Government subsidies to the rail industry wiped out the fledgling canal system in the 1830s. My guess is that highway development subsidies merely hastened the inevitable demise of US rail passenger service.
I agree with Mr. Bluestone that airline subsidies that can be found should be ended to the extent that they are not otherwise justified. For example, tremendous breakthroughs in aviation technology occurred during the two world wars to the subsequent benefit of American commercial airlines, but surely those huge indirect subsidies were simply inevitable side effects of legitimate government activity (defense). I cannot believe, however, adding in all the hidden subsidies, that subsidies to airlines would come even close to the 12.9¢ per passenger mile to Amtrak. I would be happy to be proven wrong, however.
A Fetish for Facts May REASON: Hurrah and boo. Hurrah for the fact-filled cover story on Amtrak by Jeffrey Shedd. And hurrah for the, as always, ultra-fact-filled column by Alan Reynolds. Boo, boo, and triple boo for the fact-free "philosophizing" that made up most of the rest of the issue. Would-be philosophers: spare us!
Los Angeles, CA
More than Economics Please allow me to echo the sentiments expressed by my good friend Henry Thrasher (Letters, May), in congratulating REASON for its first 12 years of publication. You have truly made it into an impressive magazine. I am especially pleased with your investigative articles, such as those on the United Farm Workers, Three Mile Island, and Love Canal.
However, I do have one complaint. It seems to me that far too many of your articles, features, and columns are devoted in some way to economics. While I am pleased to see REASON being an uncompromising defender of the free market, this is but one portion of libertarian thought. As Sharon Presley put it in her review of The Psychology of Freedom, "Economics is not enough. Politics is not enough. Even psychology is not enough. We need integration, not compartmentalization."
I doubt if REASON is in danger of being perceived as a conservative magazine. However, I do fear that you sometimes are close to reinforcing the mistaken idea that libertarianism is just an offshoot of conservatism. I hope that in the coming months and years you will consider avoiding this potential problem by publishing a much wider range of topics and perspectives on libertarian theory and practice.
Thanks again, and best of luck in the coming years.
The FRA Responds We read with interest the article, "Concealed Costs/Bloated Benefits" by John Semmens (Mar.) This article discussed the use of benefit/cost analysis in determining the allocation of funds in Federal programs, particularly in the Local Rail Service Assistance program of the Federal Railroad Administration, for which our office provides regional administrative assistance.
Much of Semmens's article is based on the premise that the "free market" economy is always the most efficient and effective mechanism for ensuring the public good. The FRA would not agree with this premise in all situations. The Local Rail Service Assistance Program was mandated by the Railroad Revitalization and Regulatory Reform Act of 1976 (4R Act). This legislation was necessitated by the fact that a major crisis had developed in the nation's rail system while under private management. The thrust of the program was to preserve essential local branchlines. While there may have been some misjudgments in the program, we would strongly challenge the author's assertion that "The Federal Railroad Administration will waste $90 million in taxpayer's funds" on the program. Moreover, few analysts would accept that the railroad industry operates in the "free market" mode suggested by the author.
The author's description of the Apache Bridge Project in Arizona is inflammatory but correct in some respects. While this project is by no means typical of other state projects under the program, it met eligibility criteria of the legislation. However, what Semmens fails to explain is that the Federal government urged the state to loan the funds to the Apache railroad at whatever interest the state deemed desirable. This procedure would have returned funds to the public treasury for cases of greater need. We wonder why Mr. Semmens did not urge the state to give Apache a loan instead of an 80% grant, or argue as fervently at the state level as he does in this article. In fact, Mr. Semmens wrote and defended a benefit/cost methodology for the state and for the Apache project which simply uses "Revenues less expenses" to determine cost/benefit information. In addition to totally neglecting social costs, this formula ensures that the most profitable companies will show the highest benefit/cost and obtain the most Federal dollars. This amounts to advocacy of welfare for corporations which would seem inconsistent with the rest of Mr. Semmens's philosophy.…
Mr. Semmens's article makes some good points. Benefit/cost figures can be manipulated to produce poor analysis and to serve political purposes. However, we wish to clarify some of the misrepresentations in the article. The author gives no data to back up his generalization that waste occurs throughout the railroad system, with the exception of the Apache project. The author describes some aspects of the benefit/cost methodology incorrectly. Certain transfer payments, for example, are not allowed as part of general benefits under FRA's guidelines. Several of the author's generalizations about the real world of transportation are incorrect. For example, there are rail branchlines in which all rail shipments were replaced by trucking, so this assumption is not as "ludicrous" as the author claims. It would take more space than a letter permits to give a detailed reply to the author's generalized critique of benefit/cost analysis.
We would also point out that benefit/cost analysis is only one part of the decision-making process. Many effects of rail service problems are difficult to quantify (it is usually safer to carry hazardous materials by rail than truck, but the value of safety is difficult to measure). Thus, state and Federal governments weigh various priorities including a benefit/cost analysis in attempting to serve the public good.
FRA, Western Region
San Francisco, CA
Mr. Semmens replies: The free market is the best way of meeting man's material needs. The fact that the market may be imperfect is not the relevant issue in evaluating government intervention. The relevant issue is whether the intervention improves upon the market. The evidence is clear that it does not.
Through government's intervention, resources are diverted from more profitable uses to marginal or sub-marginal uses. The projects which the Federal Railroad Administration likes to fund are those which have been unable to obtain financing through voluntary means. Thus, the FRA seeks to overturn the combined judgment of all the financial decisionmakers throughout the economy. It is not credible that such a procedure enhances the public good.
In February, the National Conference of State Railway Officials sent out a letter urging states to file as many grant applications as possible in order to convince Congress of the "need" for the FRA program. This is hardly a reasoned improvement over the market. This is the same old government waste.
As for the rest of Mr. Regan's comments, my analysis stands as is. Examination of the FRA's Benefit/Cost Guidelines substantiates all of the points made in my original article.
Gilder Glossed Over? Robert Poole's critique of George Gilder's Wealth and Poverty was a little unfair. I got the impression that Gilder related giving and supplying analogically rather than suggesting suppliers were altruistic. Also "faith in the providence of God" does not mean that the faith need be placed in his God, but in the God as understood by the one who has the faith, and therefore takes the actions he takes with hope. Again in the area of reason, faith, and mysticism, the concepts expressed seem to be related by analogy. Aristotle, the first and foremost defender of reason as the vehicle for intellectual growth, recognized the value of intuition (mysticism) as the progenitor of ideas. Not until such intuitively perceived ideas were demonstrable as valid through reason are they to be given ascent (invested in might be the capitalistic economic analogue).
San Diego, CA